The Active Pharmaceutical Ingredient (API) industry in India is gearing up to grab the fast growing global market opportunities through quality manufacturing and R&D activities even as global pharma majors are looking towards low cost quality manufacturing centres in the emerging nations.
According to the latest figures from the Bulk Drug Manufacturers Association (BDMA), the size of the API industry is about Rs 32000 crore to Rs 35000 crore ($6.61 billion to $7.23 billion) of the total Rs 78000 crore ($16.12 billion) Indian pharma industry. Out of the total API business, almost Rs 15000 crore to Rs 18000 crore ($3.1 billion to $3.7 billion) comes from exports.
As per BDMA estimates, the industry has maintained almost 10 to 15 per cent growth both in API and its exports business. The country has around 600 API manufacturing companies out of which almost 500 are members of the association, informs M Narayana Reddy, president, BDMA and managing director of the Hyderabad-based niche API manufacturing company, Virchow Laboratories Ltd.
While the increase in volume-wise production for the domestic pharma industry has resulted in a growth of domestic market for APIs, the increasing number of companies exploring overseas market and the growth of generic potential in the most regulated and rich markets like the US and Europe has created a huge opportunity for Indian companies in exports business.
The aggressive market exploration of Indian companies in overseas countries, especially in the semi-regulated and regulated markets are a major reason for the fast growth of the API industry. According to a study conducted by Ernst and Young for the Indian Brand Equity Foundation (IBEF), published in December 2008, the semi regulated markets account for a majority of bulk drugs exports with a 60 per cent share.
However, the major Indian companies which are pursuing the regulated market as a large number of products have started losing their patent protection in these countries in last two years, are aggressively filing drug master files (DMFs) with the drug regulators in the US and Europe.
The E&Y study reveals that the share of Indian companies in total DMF filed with the US FDA increased to 50 per cent in 2007 from 14 per cent in 2000. The official figures indicate that of the 6,300 active drug master files (regulatory applications for receiving marketing approvals in the US), 26 per cent or 1,700 are from the Indian companies, reveals the study.
An important change which was witnessed in the Indian API industry in the recent years is that the companies which earlier had highlighted low cost manufacturing and R&D facilities as their strength has started emphasising on quality of research, development and production to switch over to value- generation mode.
Evidently, the Indian companies can manufacture bulk drugs in-house at 40 per cent to 50 per cent of ethicals' cost. But, with the Indian focus turning to the quality conscious regulated market for future growth, the companies gradually acquired a quality focus for their activities, not only for these markets, but for the semi-regulated markets as well, comments an industry source.
Entering into the strictly regulated markets has also posed a new set of challenges for the Indian companies. The fast growing generics market, with the increase in number of drugs going off patent till 2012 in the US, has generated huge competition between the Indian and overseas generic companies. Further, the ongoing price decrease of API products dictated by both the market and the customers has also posed another challenge. The companies are acquiring various strategies to overcome these challenges.
For instance, Dr Reddy's Laboratories, the generic major based in Hyderabad, Andhra Pradesh, is relying on continuous cost management and new product launches to offset the price erosion. The company is following a strategy with continuous cost improvement programmes and process efficiency improvements along with arranging a pipeline of new products for development and launch for this, according to company officials.
The company is expecting a large chunk of market shares for its finasteride, gemcitabine, and ramipril products in the US and Europe in future. The company also has coverage of 60 - 80 per cent of the value of products going off patent in the US over next few years.
Other bulk drug majors including Ranbaxy Laboratories Ltd, Aurobindo Pharma, Cadila Healthcare Ltd, Cadila Pharmaceuticals Ltd, Sun Pharmaceuticals Industries Ltd, Cipla Ltd, Dishman Pharmaceuticals & Chemicals Ltd, Divi's Laboratories Ltd, Hikal Ltd, Orchid Chemicals & Pharmaceuticals Ltd and Torrent Pharmaceuticals Ltd are also keen in leveraging the potential of the global bulk drug industry.
Of this, Aurobindo Pharma has recently signed a series of agreements with the global pharma leader Pfizer for marketing its 39 products to be sold in the US and Europe. At the same time companies like Hikal and Dishman has set up their exclusive facilities to manufacture high potency APIs (HPAPIs) to explore the potential of outsourcing activities in this area.
The E&Y report identifies Ahmedabad Ankleshwar, Vapi and Vadodara in Gujarat, Mumbai, Tarapur, Aurangabad and Pune in Maharashtra, Hyderabad and Vishakhapatnam in Andhra Pradesh as major API clusters in the country. Besides this Chennai in Tamil Nadu, Puducherry, Mysore and Bangalore in Karnataka and Panaji in Goa are the other centres where API manufacturing and research companies are based.
Even though the bulk drug industry in the country has proven its strength in various segments, lack of government support is one of the major issues to be addressed immediately for the growth of the industry, opines Narayana Reddy. The strict environmental protection rules and the approval process for the Environment Certificate from the Ministry of Environment and Forest for each product manufactured has only helped to hamper the growth of the Indian companies, he adds.
"It is true that we should go by the rules to reduce environment pollution. But the government should extend some sort of support in setting up the waste disposal facilities in the bulk drug industry hubs like Andhra Pradesh, so that we can overcome the issue," says Reddy.
The major reason for India to still rely on imports of intermediates from China for formulations manufacturing is because of the strict environmental laws. The manufacturing of intermediates requires large-scale chemical activities which goes against the current environment norms. At present India relies on China for almost 60 to 70 per cent of its intermediate needs despite the competition between the two countries in API sector.
The large-scale domestic production of intermediates could also reduce the manufacturing cost of formulations. Such an endeavour could save minimum 10 to 15 per cent of the formulations manufacturing cost, when compared to the current cost which includes the cost of intermediates imported from China, points out Reddy.
Despite continued requests of the association for past several years, the government has not taken any step to support the bulk drug industry. "If the government would have supported us through incentives, subsidies or common waste disposal facilities, we could have managed to produce 50 per cent result more than our current performance in the industry," he adds.
Meanwhile, the industry is moving ahead with increasing their expertise in chemical engineering and quality products for the global market and increasing capacity and service portfolios to satisfy the global customer in outsourcing field. The low cost R&D and manufacturing capacity, value-added service and strict adherence to delivery timelines has made India a brand in Contract Research and Manufacturing Services (CRAMS) in the global industry. Companies like Shasun, Aurobindo and Cadila Pharma are increasing their facilities to satisfy their business needs, both in-house and outsourcing. Such efforts are sending positive signals to the global pharma industry, opine industry experts.